A veteran tech investor says the AI cycle has little in common with the dot-com era, noting that capital returns and infrastructure usage all point to a durable boom rather than a speculative blow-off.
In a new discussion hosted by a16z general partner David George, Atreides Management CIO Gavin Baker says today’s AI buildout is vastly different from the 2000 internet mania.
Baker first highlights the extremes of the internet speculation two decades ago, in contrast to today’s valuation environment.
“I do not believe we’re in an AI bubble today. I had depending on how you look at it, the privilege and the misfortune of being a tech investor during the year 2000 bubble, which was really a telecom bubble. And I think it’s really helpful to compare and contrast today with the year 2000. First, I think Cisco peaked at 150 or 180 times trailing earnings. Nvidia’s at more like 40 times. So valuations are very different.”
Baker also looks into infrastructure utilization, invoking the infamous “dark fiber” problem of the early internet era — a glut of unused capacity buried in the ground. Today, he says, GPU demand is the exact opposite.
“At the peak of the bubble, 97% of the fiber that had been laid in America was dark. Contrast that with today. There are no dark GPUs. All you have to do is read any technical paper, and one of the biggest problems in a training run is that GPUs are melting.”
He adds that return on invested capital has actually increased for the biggest AI spenders since the CapEx (capital expenditure) wave began, a critical proof point for sustainability and earnings durability.
“There is a very simple way to cut to the heart of all of this. It is the return on invested capital of the biggest spenders on GPUs, who are all public. And those companies, since they ramped up CapEx, have seen, call it a 10-point increase in their ROICs (return on invested capital).”
Baker says debate remains over whether returns will hold as spending continues, especially as Nvidia’s next-generation Blackwell systems roll out. But for now, he sees the data as decisive.
“I personally think it will, but there’s no debate that, thus far, the ROI on AI has been really positive, and valuation-wise, we’re just not in a bubble.”
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